Problem 2-24

Which security should sell at a greater price? a. A 10-year Treasury bond with a 5% coupon rate or a 10-year T-bond with a 6% coupon.

multiple choice 1

• A 10-year Treasury bond with a 5% coupon rate

• A 10-year T-bond with a 6% coupon

b. A three-month expiration call option with an exercise price of $40 or a three-month call on the same stock with an exercise price of $35.

multiple choice 2

• A three-month expiration call option with an exercise price of $40

• A three-month call on the same stock with an exercise price of $35

c. A put option on a stock selling at $50 or a put option on another stock selling at $60. (All other relevant features of the stocks and options are assumed to be identical.)

multiple choice 3

• A put option on another stock selling at $60

• A put option on a stock selling at $50